HR programs evolving as recession deepens

But employers can’t lose sight of long term

By Shannon Klie

02/23/2009|Canadian HR Reporter|Last Updated: 02/19/2009

As Canadian organizations face what some call the worst economic downturn in decades, the majority of employers are looking to make changes to HR programs as a way to cut spending without cutting jobs, according to a survey by Watson Wyatt.

While 84 per cent of 138 organizations surveyed by the consulting firm last November planned to make changes to HR programs in light of the economic crisis, employers and HR departments need to be careful that any cuts to benefits and perks don’t damage employee engagement in the long term, said Liz Wright, Watson Wyatt compensation practice leader for central Canada.

“Companies today really have to look at it quite strategically and understand what they need to sustain the business,” said Wright.

Employers remember how hard it was to acquire talent in the last five years and know, once the economy picks up again, there will be even more competition for talent in the face of baby boomer retirements, she said.

They know they can’t do anything that will significantly damage the workplace culture and make it harder for them to attract and retain employees down the road, he said.

What’s safe

Retiree benefits: Only five per cent of 192 employers surveyed in January by consulting firm Hewitt plan to cut retiree benefits and even fewer plan to cut retirement contributions or member services.

Medical, dental and disability plans: The vast majority — 80 per cent — of employers surveyed by Hewitt would not cut these benefits and some are planning to expand programs. Benefits that improve employees’ overall well-being and help them manage stress are particularly popular, found Hewitt, including health and wellness programs and coverage for services such as massage and physiotherapy.

“In lean operations where every employee counts, companies need staff to contribute by staying healthy and engaged,” said Rochelle Morandini, a senior organizational health consultant with Hewitt. “Employers understand that they need to support their employees in managing their stress and staying well so they can maintain productivity.”

Employee recognition: The majority of employers see employee recognition and loyalty programs as good ways to retain employees and ensure they work hard to help an organization achieve its goals, said Tim Clarke, Hewitt Canada’s benefits practice leader. Wright, who is seeing a resurgence in recognition programs, agreed.

“Recognition in these trying times is absolutely critical,” she said. “It goes a long way in the organization to reinforce engagement.”

However, employers are being more spendthrift with recognition than in the past, said Lindenberg.

“They’re still doing it, but they’re doing it on a less grand scale,” he said.

Adoption policies: Financial grants of $10,000 or more to help employees with adoption expenses have received lots of media coverage and these benefits are likely safe because they show employees the organization cares about their needs. With so few employees using them, the cost is considered “a drop in the bucket,” said Wright.

Flexible work arrangements: For the most part, flexible work and telework don’t cost an employer all that much, and sometimes save the employer money. Plus, they are a good way to show employees their needs are being looked after, said Lindenberg.

“There’s still a commitment to that. It adds to the employment brand,” he said.

Some employers are offering employees four-day workweeks, with a 20-per-cent reduction in pay, as a way to reduce salary budgets without cutting jobs. But employers have to be careful with this option, said Wright. Employees can’t be expected to complete the same amount of work in less time because it will only lead to resentment and burn out, costing an employer more in the long run, she said.

“Hopefully companies are not abusing that fact and it’s up to management to manage the workload effectively,” she said.

What’s getting cut

Business travel: Travel is the first perk on the chopping block, said Wright. Instead of flying employees to business meetings, more and more employers are using teleconferencing. One-in-four employers surveyed by Watson Wyatt are adding restrictions to travel policies and 58 per cent of employers surveyed by Hewitt plan to cut back on travel. Corporate retreats are also being cut unless there is a real business need, said Wright.

Holiday celebrations: Last year, 32 per cent of employers surveyed by Hewitt and 22 per cent of those surveyed by Watson Wyatt cut back on holiday celebrations.

Extracurricular memberships: Golf club memberships, fitness club memberships and the like are on the chopping block, said Lindenberg.

Salary increases: A significant number of companies are revisiting salary increase budgets for 2009. Salary increases will decline, on average, from the initially forecasted 3.5 per cent to 2.9 per cent, according to the Watson Wyatt survey.

Employee extras: Tuition reimbursement and subsidized dining facilities are also on the way out, with Watson Wyatt finding 15 per cent of employers have already cut or will cut these programs.

On the fence

Training and development: The majority of employers recognize the value of training and development in maintaining employee engagement, said Clarke at Hewitt, but 21 per cent of employers surveyed by Watson Wyatt said they are eliminating or reducing training programs.

“These aren’t easy decisions but if it’s between that and starting to drop workforce, significantly, then some of those programs are the first to leave,” said Wright.